SGOL - Gold: IMF Projects Global Growth At 3% The Lowest Since 1990

2023-04-10 09:32:46 ET

Summary

• The Managing Director of the International Monetary Fund, Kristalina Georgieva, has warned of increasing vulnerabilities in the global economy as central banks continue to work on tackling stubbornly high inflation.
• The International Monetary Fund (IMF) and the Bank of England have raised concerns about the resilience of non-bank financial institutions, which hold almost half of the world's financial assets.
• Recession fears have been reignited due to recent banking collapses and rescue deals, leading to concerns of a credit crunch and weakened global growth.
• The World Bank warns of a "lost decade" unless policy-makers adopt ambitious initiatives to boost labor supply, productivity and investment.
• Recession fears have been reignited due to recent banking collapses and rescue deals, leading to concerns of a credit crunch and weakened global growth.

Inflation Fears Continue

The Managing Director of the International Monetary Fund, Kristalina Georgieva, has warned of increasing vulnerabilities in the global economy as central banks continue to work on tackling stubbornly high inflation.

Speaking ahead of the annual IMF-World Bank spring meetings, Georgieva stated that a more fragile global economy will result in slower growth and greater financial fragility.

The IMF has projected global growth to remain around 3% over the next five years, the lowest medium-term growth forecast since 1990.

Georgieva also warned about the potential negative economic impacts of geopolitical tensions, fuelled by frictions between the US and China, and cautioned governments to be cautious when implementing new spending programs due to the current environment of higher inflation.

The International Monetary Fund ((IMF)) and the Bank of England have raised concerns about the resilience of non-bank financial institutions, which hold almost half of the world's financial assets. Non-banks include a diverse range of firms such as pension funds, insurers and hedge funds that provide financial services, including lending. They have grown strongly since the global financial crisis of 2008 and have expanded by an average of 7% per year, according to the Financial Stability Board ((FSB)). Risks include credit losses and a liquidity mismatch, with investors able to quickly withdraw funds from open-ended funds, which have less regulatory oversight than banks.

Recession Fears Rise

1. Recession fears have been reignited due to recent banking collapses and rescue deals, leading to concerns of a credit crunch and weakened global growth. Global bank stocks are down nearly 15% this month, and companies in sectors sensitive to the growth outlook are slipping on stock markets. Ratings agency S&P expects US and European default rates to reach more than double what was seen in September 2022. Corporates have higher levels of borrowing now than during the great financial crisis.
2. The World Bank warns of a "lost decade" unless policy-makers adopt ambitious initiatives to boost labour supply, productivity and investment. It estimates that average potential worldwide economic growth will slump to a three-decade low of 2.2% per year through to 2030 without big policy changes. The bank is also watching developments in the banking sector as rising interest rates and tightening financial conditions drive up the cost of borrowing for developing countries.
3. In brief: A Goldman Sachs report suggests that generative AI like ChatGPT could lead to a productivity boom that would lift global GDP by 7% within 10 years. China's Premier says he is committed to opening up the world's second-largest economy and delivering reforms that can help stimulate growth. Moody's says that prolonged stress in the banking sector could impact the US's economic and fiscal strength. Portugal is rolling out a $2.7 billion plan to help low-income families cope with soaring inflation and high interest rates. Canada's budget looks to help the country compete with the US in the low-carbon economy. Egypt is coming under pressure to devalue its currency after its value slid on the black market. Russian President Vladimir Putin says that record-low unemployment and marginally higher real wages are evidence of a gradual economic recovery in the country. A report by researchers from the World Bank, Harvard Kennedy School, AidData and the Kiel Institute for the World Economy shows that China bailed out 22 developing countries between 2008 and 2021, spending $240 billion on the bailouts.
4. The IMF has launched a voluntary Central Bank Transparency Code to reinforce trust in central banks. A blog explains what a country's current account balance is and whether a deficit is good or bad for the economy. IMF researchers outline the far-reaching and long-lasting implications of greater digital tech adoption for productivity and labor markets.

In summary, Inflation fears continue as central banks work on tackling high inflation, leading to a more fragile global economy and slower growth. The IMF and the Bank of England have raised concerns about the resilience of non-bank financial institutions. Recession fears have been reignited due to recent banking collapses and rescue deals, leading to concerns of a credit crunch and weakened global growth. Low interest rates can be supportive of gold prices because they reduce the opportunity cost of holding gold, which doesn't pay any interest or dividends. Conversely, when interest rates rise, the opportunity cost of holding gold increases and demand for the metal may decrease, leading to lower prices.

Let's take a look at the weekly standard deviation report published in Market Place as Mean Reversion Trading and see what short-term trading opportunities we can identify for the coming week.

Gold: Weekly Standard Deviation Report

Apr. 09, 2023 11:45 AM ET

Summary

• The weekly trend momentum of 1928 is bullish.
• The weekly VC PMI of 2013 is bullish price momentum.
• A close below 2013 stop, negates this bullishness neutral.
• If long, take profits 2061 - 2097.
• Next cycle due day is 4.15.23.

Weekly Trend Momentum

The gold futures contract closed at 2026, indicating a bullish trend momentum for the week. This is confirmed by the market closing above the 9-day Simple Moving Average ((SMA)) of 1928. If the market closes below the 9 SMA, the bullish trend would be negated and turn neutral.

Weekly Price Momentum

Additionally, the market closing above the VC Weekly Price Momentum Indicator (VC PMI) at 2013 confirms the bullish trend momentum. However, if the market closes below the VC PMI, the bullish trend would be negated and turn neutral.

Weekly Price Indicator

For trading strategy, it is advised to take profits on shorts into corrections at the Buy 1 and 2 levels of 1978 - 1931 and go long on a weekly reversal stop. If long, use the 1931 level as a Stop Close Only and Good Till Cancelled order. It is suggested to take profits on longs as we reach the Sell 1 and 2 levels of 2061 - 2097 during the week.

The next cycle due date for the gold futures contract is 4.15.23.

Summary: The current weekly trend momentum for the gold futures contract is bullish, confirmed by both the price momentum and price indicator analysis. Traders should consider taking profits at the specified levels and monitoring the upcoming cycle due date.

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